Tax Year Prior to 2020: Single Member LLC Taxes and Quickbooks Self-Employed

[josiahk]

Hi, I am starting my Single-Member LLC business and want to make sure I use the correct system for my taxes. I understand that as a single-member LLC, my business income is taxes the same as if it was my personal income tax. Therefore, I believe that Quickbooks Self-Employed would be the right system for me to manage my quarterly taxes (is this correct)? In doing so, I don't need to intensify my business in the taxes as it just goes as my income therefore I use my SSN rather than my business EIN.

Do I need to sign a 1099 form as a contractor in my business, or any other kind of form? Or can I just keep using the Quickbooks Self-Employed without worrying about any 1099 forms or other forms between me and my business?

[Critter]

Ok ... you are a bit confused ... a single member LLC is a disregarded entity for income tax purposes ... and all the income & expenses are reported on the Sch C which is part of your personal tax return.   If you have an EIN for the business it is also entered on the Sch C along with your SS#.  If you need to ever fill out a W-9 for anyone you will use the EIN not your SS#. 

Next you will never issue yourself a 1099 form ... think of your business as one pocket of your pants and you can move money from that pocket to the other pocket without a tax reporting form.  

And the QBSE program is the correct version for a Sch C business ...

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

          

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

[WKins2]

That is correct; as a single-member LLC, your business income and expenses will be reported on Schedule C of your personal 1040, there is no separate business tax return. You will use your business EIN on the Schedule C if you have one. 

QuickBooks Self-Employed is meant for small business (generally one-person operations) that need a way to track business income and expenses separate from their personal finances. QuickBooks Self-Employed will also help you calculate your quarterly estimated payments. The only drawback of QuickBooks Self-Employed is that it is not as robust as the other versions of QuickBooks Online. You will want to upgrade to at least QuickBooks Online Essentials once your business starts to become more complex, which inevitably happens as you become more profitable. 

As far as 1099s, you can only be a contractor in your own business under VERY limited circumstances. You do not need your business to issue you a 1099 or any other form. If your business pays any unincorporated person or business more than $600, you will want to have them fill out a W-9 and provide that to you before you pay them (it can sometimes be difficult to get this form from the service provider after you pay them). The W-9 will include all of the information needed for the 1099 that you will need to issue them by January 31st of the following year. Note that if the W-9 shows that the service provider is an incorporated business (an S or C Corporation), you do not need to issue them a 1099. You also do not issue 1099s for credit card payments or for payment processing payments (like PayPal). 

For more information on 1099s, please see https://www.irs.gov/forms-pubs/about-form-1099-misc.

[courtneyWA]

Thank you in advance for your information.

If I receive a 1099-nec as a contractor, using my business EIN, do I count that income in Quickbooks self- employed as business income?

I am concerned that If I count it there and in Turbo Tax as income, It will appear that earnings are double what they actually are.

[DianeW777]

You should enter this business income with other business income as usual in QuickBooks to keep your information accurate in the accounting for your business activity income. 

If you are transferring your QuickBooks data to TurboTax, then do not enter the Form 1099-NEC again when preparing your individual tax return.  This will prevent double taxing the same income.

Keep your Form 1099-NEC with your business records noting that it has been included with your business income.

[InDsgnLTD]

So, I am in a similar situation and just want to clarify and understand better.

I have an LLC using an EIN

So, I invoice my clients and generally count that as business income.

But I also have 2 clients that 1099 me. 

The 1099s generally have my EIN on it (not my SS). 

So my 2 questions are: 

When doing taxes; I understand that I report my income I would subtract the 1099 from my business income and then use the 1099 separately? Am I correct about that? 

And if I am correct about that, what is the best way to record this accurately in Quickbooks so that the end of year taxable income is accurate, and the 1099 income and invoices are not counted twice?

Thanks,
T

[Critter-3]

Ok ... if ALL your income is already reported in the QB program in the total income amount  then ONLY enter that total in the TT program ... you do NOT need to enter the 1099 income separately.  The IRS gets just the total on the Sch C and the business of entering the 1099s in the TT interview is just for your use only not for filing the return.  

And there is nothing to be reported in QB that has already not been entered ... just ignore those 1099 forms since the paid invoices have already handled this income.   

[InDsgnLTD]

Thank you very much. That makes it a lot clearer. I thought the actual 1099 was relayed to the IRS so that they can cross reference/cross check it with the expenses from the company that is 1099 me. 

I assumed that the IRS compared this between companies to make sure that people (either the payer or the receiver) are not cheating on their taxes. 

Therefore, I will only include total income. Because this actually also completely resolves another issue. A few customers pay me for things that I buy on their behalf during a job. So, for example, I have to get an extension cord from Walmart; I bill that back to them on the invoice. With this new understanding, I can use the QB total profit and not have to worry about a client that might 1099 me for both services rendered, and expense reimbursement/billable expenses. 

Thanks,

T

[Critter-3]

Every penny you get paid on an invoice is considered income even if you billed for an expense you incurred ... it balances off naturally on the Sch C.

And the IRS does get copies of the 1099 forms however on your tax return they only need the total income amount and that is how they reconcile your return to what was reported  ... as long as you report at least as much as the 1099 forms you are good to go.  

[InDsgnLTD]

Last question. that all makes perfect sense. 
Is it worth it to list billable expenses in their own category or real category. 

Let me explain more for clarity. 

For example, if I buy a computer for my business; I put it in a category called Hardware! 

When I buy a computer for a client and charge them back, do I also put that under Hardware category or should I make a specific Billed Expenses? What is a genral practice? 

I understand that it all washes out either way; but what is the best practice that people abide by?

Again, thank you very much for the information. Very helpful.

T

[Critter-3]

That is up to you ... it really depends on how you use the invoice and category billing systems in your bookkeeping program. 

Usually items purchased for resale to a client are considered inventory but that is not a hard and fast rule as long as you are consistent in your handling of the situation.